Sunday, February 26, 2006

When you watch the screen day in and day out you recognize a pattern of support and resistance zones which are tested and then finally broke through. A good way is to set up your chart with pivot points which tell you if the support or resistance has been broken and where the new objective for the next support and resistance zone is. You can use Fib retractement when you believe the equity has reached a top and also by checking this with a stop or decrease and momentum and the equity has already passed one of the support and resistance zones and may be getting ready for a pullback of atleast 38% and for a complete reversal if the 61.8% line is broken. The reason these zones work is beacuse the professional traders and pit traders will put set stop losses on there trades and if the equity moves to this point then they all sell and then momentum comes in from the price going higher/lower by even more stop losses being triggered until finally a pivot point is reached and profit takers begin to get there 10-20pts from the breakout which sets up for a fib retractment of 38% almost always when the trend is at its near end and the equity has already moved a large percentage in one direction when compared to the average price distance it moves in one direction for short term intraday swings..